Uncontrolled hydrate decomposition poses extraordinary risks, such as submarine landslides during hydrate exploitation, and gas leakage during hydrate storage/transportation. Previous studies suggested inhibitors can effectively prevent hydrate decomposition by adsorbing onto the hydrate surface. However, herein, we find inhibitors have very limited adsorption coverages on hydrate, which cannot fully explain their good performance. In this study, by combining experiments and molecular simulations, a new inhibition mechanism is proposed, in which nanobubbles act as the primary factor in inhibiting hydrate decomposition. Specifically, when PVP (a typical inhibitor) is added into the solution, its hydrophobic groups interact strongly with CH4, thereby increasing CH4 solubility and inducing the formation of CH4 nanobubbles. These nanobubbles are then encapsulated within the hydrate and inhibit hydrate decomposition by the following process: nanobubbles gradually become exposed to the aqueous phase during hydrate decomposition and release CH4 to the region near the nanobubble-hydrate interface. The high local CH4 concentrations near the nanobubble-hydrate interface would promote the formation of microstructures necessary for hydrate nucleation, thereby amplifying the driving force toward nucleation and consequently inhibiting hydrate decomposition. Our proposed “nanobubble inhibition mechanism” can provide a theoretical foundation for developing and applying inhibitors to prevent hydrate decomposition in various industrial applications.